by John McCarthy Consulting Ltd. | Feb 5, 2024 | Blog, News
Some accountants can still remember a time in the distant past when it was possible to have the same client engagement letter in place for several years, without too much upset.
However, the pace of change in the various pieces of overlapping legislation (much of it of a whistleblowing nature) that impact on engagement letters, seems to be getting faster and faster. Different obligations under criminal law, tax law, company law and anti-money laundering that are now required in the typical contract with your client, mean that there is a never ending requirement to review your letters and issue revised and updated letters to your clients on an annual basis.
Here is a quick checklist of the legislation you need to include in audit engagement letters:
Audit engagement letter under the Companies Act 2014
(correct at the time of going to press on 2 February 2024):
|
Topic
|
Legislation
|
| Company law |
|
| Criminal law
|
- ·‘Section 59 Criminal Justice (Theft and Fraud Offences) Acts, 2001 and 2021’
- ‘Criminal Justice Act 2011’
|
| Tax law |
- ‘Section 1079 Taxes Consolidation Act, 1997’
|
| Anti-Money laundering/terrorist financing |
- ‘Criminal Justice (Money Laundering and Terrorist Financing) Acts, 2010 to 2021’
|
| Data Protection |
- ‘Data Protections Acts 1988 to 2018 and the GDPR’
|
In future issues of this blog, we will cover the typical legislative references required in engagement letters for other entities including specialised ones like:
- Solicitors (reporting under the new Solicitors Accounts Regulations 2023 of the Law Society);
- Auctioneers
- Owners management companies;
- Charities;
- Insurance intermediaries; and
- Industrial & Provident Societies
Please also go to our website www.jmcc.ie/training to see our latest:
- Latest updated AML for Accountants webinar (December 2023) which explains the current legal AML reporting position for accountancy firms and includes a quiz. Upon completion, you receive a CPD Certificate of attendance in your inbox. A 20% discount is available for orders of five or more webinars/products, if bought together.
- There are other accounting/audit webinars on the site and more will follow throughout 2024.
- Anti-Money Laundering Policies Controls & Procedures Manual (March 2022) – View the Table of Contents click here.
- letters of engagement and similar templates. Please visit our site here where immediate downloads are available in Word format. A bulk discount is available for orders of five or more items if bought together.
- ISQM TOOLKIT – We can also tailor ISQM training and brainstorming sessions to suit your firm’s unique requirements. The ISQM TOOLKIT 2022 is available to purchase here.
by John McCarthy Consulting Ltd. | Jan 20, 2024 | Blog, News
Nearly a third of UK audits completed by small and mid-tier firms need ‘significant improvements’ after inspections by the Financial Reporting Council (FRC). The inspections were carried out for the year ended 31 March 2023 on 32 firms in total and reported by the Financial Reporting Council in late 2023.
These inspection results will be influential for Irish regulators like the Chartered Accountants Ireland, the CPA Ireland, the ACCA as well as the Irish Audit & Accounting Supervisory Authority when carrying out their inspections of Irish audit firms in 2024.
The Financial Reporting Council say that ‘disappointingly, many of our findings were in routine areas, such as
- the audit of journal entries;
- complying with archiving requirements;
- the audit of judgments and estimates (17% worse than in the previous report), and
- the audit of going concern.
Audit teams need to demonstrate a greater effort at robust professional scepticism when it comes to both the audit of judgments and estimates, and going concern.
The FRC also suggested audit teams refer to the FRC paper, What Makes a Good Audit.
We will continue with Part Two of this blog next week.
Please also go to our website www.jmcc.ie/training to see our latest:
- Latest updated AML for Accountants webinar (December 2023) which explains the current legal AML reporting position for accountancy firms and includes a quiz. Upon completion, you receive a CPD Certificate of attendance in your inbox. A 20% discount is available for orders of five or more webinars/products, if bought together.
- There are other accounting/audit webinars on the site and more will follow throughout 2024.
- Anti-Money Laundering Policies Controls & Procedures Manual (March 2022) – View the Table of Contents click here.
- letters of engagement and similar templates. Please visit our site here where immediate downloads are available in Word format. A bulk discount is available for orders of five or more items if bought together.
- ISQM TOOLKIT – We can also tailor ISQM training and brainstorming sessions to suit your firm’s unique requirements. The ISQM TOOLKIT 2022 is available to purchase here.
by John McCarthy Consulting Ltd. | Jan 20, 2024 | Blog, News
In last week’s blog ‘SME Audits Need to Improve’ we highlighted a recent report by the Financial Reporting Council (FRC) in the UK about their audit inspection findings for the year ended 31 March 2023. We continue with extracts from the report below.
Going concern was described as ‘an area of particular concern to audit firms’ by the FRC and it resulted in worse findings by 1% compared to the previous review.
Key findings of the review were:
- going concern included insufficient procedures to test cash flow forecasts;
- inadequate procedures to elevate the impact of loan covenants;
- insufficient procedures to assess the financing of debt; and
- There were ‘shortcomings in the reviews of audit work performed by engagement partners and/or engagement quality control reviewer’.
Other areas that led to such a high number of audits needing significant
improvement were:
- Revenue accuracy; and
- material accounting errors during an
Improvements recommended by the Financial Reporting Council include investment in:
- audit methodology;
- human resources,
- audit quality functions; and
- learning from mistakes made throughout their current auditing processes.
The FRC also suggested audit teams refer to the FRC paper, What Makes a Good Audit. See how to do this here.
Please also go to our website www.jmcc.ie/training to see our latest:
- Latest updated AML for Accountants webinar (December 2023) which explains the current legal AML reporting position for accountancy firms and includes a quiz. Upon completion, you receive a CPD Certificate of attendance in your inbox. A 20% discount is available for orders of five or more webinars/products, if bought together.
- There are other accounting/audit webinars on the site and more will follow throughout 2024.
- Anti-Money Laundering Policies Controls & Procedures Manual (March 2022) – View the Table of Contents click here.
- letters of engagement and similar templates. Please visit our site here where immediate downloads are available in Word format. A bulk discount is available for orders of five or more items if bought together.
- ISQM TOOLKIT – We can also tailor ISQM training and brainstorming sessions to suit your firm’s unique requirements. The ISQM TOOLKIT 2022 is available to purchase here.
by John McCarthy Consulting Ltd. | Jan 14, 2024 | Blog, News
The International Standards on Quality Management (ISQM) has been effective since December 2022.
It is applicable to all audit firms and is a step-change from the requirements of the, now defunct, ISQC 1. The ISQM introduced:
- a new risk-based quality management approach that requires audit firms to
- design and implement a System of Quality Management (SoQM); and
- operate that system of quality management for audits, reviews of financial statements or other assurance engagements.
Now that the standard has been in effect for just over 12 months, each firm must compulsorily carry out a documented review of their System of Quality Management to assess its effectiveness since coming into force in December 2022.
Part of this assessment before the 2024 audit season commences, will be:
- documenting the results of hot and cold file reviews that took place during 2023;
- analyse the root causes of these findings; and
- extract from these issues the reasons why the more significant/most frequent findings arose;
- decide as a firm how best to avoid repeating the same mistakes; and
- adjust the SoQM accordingly for a more effective audit approach in 2024.
Anyone who may like to migrate to a very user friendly version of the ISQM or use it as a benchmarking tool against which to measure the effectiveness of your current ISQM, may purchase our ISQM Toolkit for €250+VAT here.
Key features:
The Toolkit comprises three parts that are downloadable in Word format, with associated instructions in pdf format.
Part 1 – Setting Objectives and Risks.
Part 2 – Risk Assessment and Responses.
Part 3 – Monitoring and Remediation including Root Cause Analysis (RCA).
The toolkit comes with three additional optional questionnaires to help with documenting an assessment of the firm’s:
- Methodology and software providers;
- Training providers; and
- File review and Technical Queries consultants.
More information on the ISQM Toolkit is available here.
In addition, during 2023 we also published a very helpful IT Controls Assessment questionnaire tool for audit firms to help implement ISA 315.
IT Controls Assessment
Auditors are reminded that there are relatively significant changes in the requirements of ISA 315 Identifying and Assessing the Risks of Material Misstatement which was first applicable for accounting Periods Ended 21 December 2022 and of course Periods Ended 21 December 2023.
Auditors dealing with audits of affected entities will already have adopted new audit programmes in 2023, in additional to the normal audit tests, will also need to assess the entity’s IT controls (no matter what the size of that entity).
This is a significant new development for auditors of SMEs, in particular, and will be a game changer ion the type of audit documentation and evidence of assessment of such IT controls by the auditor on audit files.
For an easy to implement additional (two page) IT Controls Questionnaire to help document the above process, please click on this link to download immediately for only €60 + VAT.
Please also go to our website www.jmcc.ie/training to see our latest:
- Latest updated AML for Accountants webinar (December 2023) which explains the current legal AML reporting position for accountancy firms and includes a quiz. Upon completion, you receive a CPD Certificate of attendance in your inbox. A 20% discount is available for orders of five or more webinars/products, if bought together.
- There are other accounting/audit webinars on the site and more will follow throughout 2024.
- Anti-Money Laundering Policies Controls & Procedures Manual (March 2022) – View the Table of Contents click here.
- letters of engagement and similar templates. Please visit our site here where immediate downloads are available in Word format. A bulk discount is available for orders of five or more items if bought together.
- ISQM TOOLKIT – We can also tailor ISQM training and brainstorming sessions to suit your firm’s unique requirements. The ISQM TOOLKIT 2022 is available to purchase here.
by John McCarthy Consulting Ltd. | Jan 9, 2024 | Blog, News
The UK HMRC has issued a stop notice against a Northern Ireland company under the Promoters of Tax Avoidance Schemes (POTAS) regime.
Under the POTAS regime HMRC has the power to publish information about promoters of tax avoidance schemes that are subject to a stop notice, alerting individuals to avoid signing up to illegal payment schemes.
The Northern Ireland entity is called Target Umbrella Limited (TUL), 6 Margaret Street, Newry, Northern Ireland, BT34 1DF. The notice states that TUL is a promoter of this scheme along with a Maltese company called Integra Resourcing Limited (IRL), Block 12 Office M1 Suite 106, Tigne Place, Tigne Street, Sliema, Malta, SLM 7173.
TUL had 31 employees according to its latest available abridged financial statements to the year ended 29 November 2022 and 131 in the prior year.
The HMRC say that users of the TUL/IRL scheme sign separate employment contracts with (IRL) and TUL. Users also sign an ‘Overarching Agreement’ with IRL to provide ‘loans’ to the user.
TUL sign a contract for services with the agency or the end client to provide the services of the user. TUL then invoices the end client for the work undertaken by the user. TUL pay users a salary in line with the National Minimum Wage Act for time worked and pays the remaining amount to IRL. IRL then pays the user a second nominal salary, per payroll run, usually below £10, and a larger amount, described as a ‘loan’. The ‘loan’ amount is not taxed.
Stop notices are one of the ways in which HMRC tackle tax avoidance and those responsible for promoting it. The notice’s legal impact is:
- the promoter who receives the notice must stop selling the specified scheme;
- the promoter who receives the notice must also pass a copy of it to certain associated persons, who are also subject to the stop notice and must also stop selling the specified scheme;
- all those persons subject to the notice must inform HMRC of all the people to whom they have promoted the scheme and the names of those to whom they continue to promote it;
- the persons subject to the stop notice must inform all clients and intermediaries that they are subject to a stop notice, what this means, and provide them with a copy of the stop notice.
Where a promoter fails to comply with a stop notice they can face penalties of up to £100,000 which can increase to up to £1 million in certain circumstances.
Anyone affected should contact HMRC as soon as possible. There is more information about how to do this here.
Please also go to our website www.jmcc.ie/training to see our latest
- Latest updated AML for Accountants webinar (December 2023) It explains the current legal AML reporting position for accountancy firms and includes a quiz. Upon completion, you receive a CPD Certificate of attendance in your inbox. A 20% discount is available for orders of five or more webinars/products, if bought together.
- Anti-Money Laundering Policies Controls & Procedures Manual (March 2022) – View the Table of Contents click here.
- letters of engagement and similar templates. Please visit our site here where immediate downloads are available in Word format. A bulk discount is available for orders of five or more items if bought together.
- ISQM TOOLKIT – We can also tailor ISQM training and brainstorming sessions to suit your firm’s unique requirements. The ISQM TOOLKIT 2022 is available to purchase here.
by John McCarthy Consulting Ltd. | Dec 21, 2023 | Blog, News
Who said Continuing Professional Development (CPD to you and me) is a waste of time?
Well did you know that an entity operating a waste disposal business without a licence is committing a money laundering (ML) offence? In fact, any business that requires a licence to legitimately operate in the State, is committing a ML offence by not having/renewing the licence.
Listen and learn more about this and similar money laundering offences that are reportable by accountants on our latest AML Webinar for Accountants, updated as at December 2023.
Please also go to our website jmcc.ie/training to see our latest:
- Latest updated AML for Accountants webinar (December 2023) It explains the current legal AML reporting position for accountancy firms and includes a quiz. Upon completion, you receive a CPD Certificate of attendance in your inbox. A 20% discount is available for orders of five or more webinars/products, if bought together.
- Anti-Money Laundering Policies Controls & Procedures Manual (March 2022) – View the Table of Contents click here.
- letters of engagement and similar templates. Please visit our site here where immediate downloads are available in Word format. A bulk discount is available for orders of five or more items if bought together.
- ISQM TOOLKIT – We can also tailor ISQM training and brainstorming sessions to suit your firm’s unique requirements. The ISQM TOOLKIT 2022 is available to purchase here.
